Guide to Choosing the Best Homeowner’s Insurance

June 5th, 2018

As a homeowner, you want affordable homeowner’s coverage. But you also want the best coverage. It’s important to know and understand everything homeowner’s insurance can, and should, cover. You may be wondering: “How much homeowner’s insurance should I carry?” The answer varies, which is why we’ve gathered a guide to give you some home insurance tips and tricks and help you know how to choose homeowner’s insurance. Whether you’re buying homeowner’s insurance for the first time or evaluating your current policy, this guide to choosing the best homeowner’s insurance is here to help.

How to Save on Homeowner’s Insurance

Recent national research shows that the cost of homeowner’s insurance is on the rise. The average annual premium for homeowner’s insurance in 2015 was $1,173, up from $764 in 2005. Thankfully, there are several ways you can save on your homeowner’s insurance — including fixing your credit, bundling homeowner’s insurance, hiring a broker, raising your deductible, making home improvements and keeping your information up-to-date.

1. Fix Your Credit

Homeowners with excellent credit may save up to 50% over those with a poor credit history, depending on your location. What is it about credit that has such a significant impact on the cost of homeowner’s insurance? Historical data shows a direct correlation between having poor credit and having a higher insurance risk. So don’t be surprised when you call to get a quote and are asked for your Social Security number to do a credit check — checking credit has become a standard practice in the homeowner’s insurance industry. This is what’s known as a “soft check.” In other words, this check does not hurt your credit score.

If credit has such a significant impact on the cost of homeowner’s insurance, it’s important to know your credit score. There are three major credit reporting agencies and you’re entitled to a free credit report from each of them every year. The best place to start is making sure your credit reports are accurate and that your information is up-to-date.

Once you’ve done that, you can begin taking steps to improve your score. Making credit card and loan payments on time is a big help. Paying down debt is another area that can help you improve. Don’t submit a significant number of credit applications, as this is often viewed as a red flag. However, if you don’t have a credit card, getting one and making payments on time can positively impact your score. If you have a short credit history, time will help — as long as you aren’t making late payments or defaulting on loans.

2. Bundle When You Can

If you have multiple insurance policies, consider bundling them — that is, getting them from the same insurance company. You may also hear this referred to as a “multiline policy” and it’s common with auto insurance and homeowner’s insurance. If you choose to get both of these insurance policies from the same company, you’re a loyal customer and you’re saving them time and effort. In return for those two favorable qualities, you just may discover you’re eligible for additional discounts, making your premiums for all insurance policies more affordable.

3. Consider Hiring a Broker

Think of an insurance broker like an insurance insider — they know all about the industry but aren’t tied to a particular insurance company. They’re able to take your comparison shopping to a new level, not to mention they may know some home insurance tips and tricks that can get you special rates or discounts you didn’t know existed. Plus, an independent broker isn’t going to be fooled by marketing tactics or motivated by commission, meaning you can be sure they’ll help you get the coverage you need and none of the stuff you don’t.

4. Raise Your Deductible

Your deductible — the amount you must pay before your coverage kicks in — and your premium are directly related. If you raise your deductible, you’ll see a lower premium. If you’re looking for immediate savings and have the money on hand to cover the deductible if you need it, you may want to consider raising your deductible. How much? Annual premiums are rumored to be significantly lower if your deductible is $2,000 or more.

If you aren’t confident about being able to pay a $2,000 deductible, then consider what you could afford and see if there’s any room to increase from the deductible you currently have.

5. Home Improvements

If you’ve recently made improvements to your home or have been considering making improvements to your home, you may be able to impact your homeowner’s insurance premium in a positive way. The improvements that make a difference aren’t cosmetic, but rather enhancements to things that improve structure, function and, ultimately, longevity.

New roofs, for example, can make a difference. Roofing is one of the primary causes of leaks and water damage, so it’s understandable that old roofs — those ten years old and older — are perceived to be a greater risk, which increases your premium. If you have an old roof and are looking for a home improvement project that’s a great investment, get a new roof.

Aside from roofs, other home improvements that may qualify you for a discount include smoke alarms, storm shutters, upgrades to electrical and plumbing systems, new windows or doors, and other renovations.

6. Keep Your Information Up-to-Date

According to a national survey by the National Association of Insurance Commissioners (NAIC), one in ten homeowners has not reviewed or updated their homeowner’s insurance policy in more than five years. Keeping your insurance company in the loop about any changes to your life and/or your home is one of the easiest home insurance tips and tricks.

If you’re buying homeowner’s insurance for the first time, this will all be taken care of in your initial application. Make a note to routinely check in and update the information. If you already have a policy, when was the last time you talked to your homeowner’s insurance company? Are there any improvements you’ve made to your home that you haven’t shared with them? Have you had any major life events? Marriage? Death of a spouse?

The discounts available vary based on the company, but regardless of what insurance company you choose, they can’t give you the discounts if you don’t share updates to your home and changes in your life with them. Make sure you share progress and continue to ask about what discounts are available.

Beware of Missing Coverages: What Your Policy Could Be Missing

When was the last time you reviewed your homeowner’s insurance policy? Do you know what’s covered? If you’re like the majority of people — 56 percent to be exact — you haven’t reviewed your insurance policies in more than one year. You may even consider yourself to be one of the 14 percent who is unsure when, if ever, they last reviewed their policies. You may be surprised about what isn’t covered, but better to discover that now so you can make adjustments as needed rather than waiting until a crisis occurs.

Here are some common things that aren’t included in homeowner’s insurance policies:

1. Floods, Surface Water, Rain Damage

Believe it or not, there are a few natural disasters that are not included in a homeowner’s insurance policy. It’s true that many policies say something must be “sudden and accidental” to be covered, but despite that language, floods and damage as a result of surface water and rain are almost always not a part of your coverage.

If you’re not in a flood zone, why does it matter? According to Flood Smart, more than 20 percent of flood claims come from properties outside of high-risk flood zones. It’s not just those at risk of having several inches or feet of water in their home that should be concerned. Flood Smart also mentions that just one inch of water in your home can cost more than $25,000 in damage. Are you prepared to risk it?

2. Mold Damage

The water nightmare doesn’t end there. With water comes mold. There are plenty of types of mold that are harmless, but some that are harmful to your health — and living with that in your home can be dangerous. The Centers for Disease Control and Prevention connect the presence of mold to the development of asthma and mention that mold can be especially bad for children and those with weakened immune systems.

Whether or not mold is covered under your homeowner’s insurance policy is usually determined by the source of the mold. Is it due to a recent flood? Surface water? Rain damage? If it’s caused by one of these events that are not covered by your policy, mold as a result of that event will probably not be covered either.

3. Sewer or Drain Backups

If your sewer or drain gets clogged or your sump pump fails and everything backs up into your home, the sudden mess of water and sludge is a nightmare. Damage to everything from the floors to your electrical system can be severe and expensive. Unfortunately, this is another disaster that isn’t usually covered under a standard homeowner’s policy.

4. Earth Movement: Earthquakes and Sinkholes

If you happen to know someone from San Francisco, chances are good they could tell you earthquake damage is not covered by a standard homeowner’s policy. But this type of coverage isn’t something that’s only relevant for Californians anymore. Take one look at the United States Seismic Hazard Map and you’ll see the risk for earthquakes spans across the country.

Earthquakes aren’t the only type of earth movement that isn’t covered by a standard homeowner’s insurance. Sinkholes are another one. The only place you’re likely to have coverage for sinkholes is the state of Florida, where this type of insurance coverage is required.

5. Power Outages

If you are without power for an extended period, you can suffer a significant loss — spoiled food in the refrigerator, damage to electronics, burst pipes — and may need to temporarily relocate to a hotel until power is restored. Expenses resulting from power outages may not be covered under your homeowner’s policy.

There are a few questions that often determine whether or not a power outage is covered. Where did the outage originate? Why did it occur? If the outage originated on your property you might be covered, but widespread outages usually are not. If the outage occurred as a result of a flood or earth movement and you aren’t covered for either of those conditions, you probably don’t have coverage. The standard coverage for power outages varies depending on the company and the policy — even more reason to be sure you know your policy inside and out.

6. Car Sound System Theft

Shifting gears from property damage to personal property: As you may know, it is common for homeowner’s policies to include coverage for your personal property — even loss due to theft. However, audio equipment that’s permanently installed in your car is not likely to be covered under your policy. If you have an expensive sound system in your car, you should revisit your auto insurance policy. There are options available to make sure it’s covered under comprehensive coverage.

7. Vacant Properties

Homeowner’s insurance is meant for occupied homes, not vacant ones. If you’re in a situation where you need to move, make sure before selling your home that you know what your policy does and doesn’t cover. In most cases, policies will include exclusions for homes that have been vacant for a certain number of days. The reason? Vacant properties come with a higher risk, so insurance policies for these work differently. Make sure you know your current coverage and how you will need to adjust your policy to cover a vacant property.

8. Jewelry, Artwork, Antiques

As we mentioned, many homeowner’s insurance policies provide coverage for personal property. However, there are limits to how much they will cover. For example, if your diamond goes missing, you may have a jewelry limit of $1,000 on your coverage. If you lose a precious stone from a piece of jewelry, that may not be covered at all. The same often applies to artwork and antiques. A minimum level of coverage may be provided but usually doesn’t come close to what you would need to replace it. Knowing the limits of your personal property coverage, especially if you’re relying on it to cover things like jewelry, artwork and antiques, is important.

Eight Tips for Evaluating Your Policy

You already know you need to dig up and dust off that homeowner’s policy. And if you’re buying homeowner’s insurance for the first time, you know more about what to expect in your coverage. But how can you evaluate your policy and make sure you have the coverage you need? Here are a few tips for evaluating your policy:

1. Check that you have enough coverage for your home. Don’t make the costly mistake of assuming your coverage will rise and fall with your home’s market price. The replacement value of your home needs to take into consideration the cost of labor and materials required to rebuild it. That amount of coverage may be significantly higher than your home’s market price.

2. Conduct an annual policy review. Do not let one year go by without reviewing your homeowner’s policy. It may be a tedious task, but it’s worth it.

3. Know exactly what your policy covers. Reviewing your policy and understanding every element of it are two different things. While reviewing your policy each year, you may find a section you don’t understand. When you get to that point, call your insurance agent and ask questions.

4. Insure your home improvements. When you make improvements to your home, there are a couple of things to consider. These improvements may qualify you for a discount on your premium, but also consider how those improvements will affect the value of your home. Make sure you have enough coverage for your home during and after home renovations and/or improvements.

5. Be prepared for the extra cost of rebuilding your home. If you have a serious disaster and need to rebuild your home, you may not have coverage with a large enough payout to rebuild your home or replace all of your personal items. There are three options for the amount of homeowner’s insurance you can have and not all of them will leave you with the lump sum of money it would take to rebuild your home. The policies that do have a more expensive premium.

6. Do a home inventory.It’s possible that you can have a home insurance claim denied because you don’t have good records of your personal belongings and their appraised value (or purchase price). Document what you have and take photos and videos of every room, closet and cabinet space. Then, if your home is destroyed, you have an accurate inventory of everything.

7. Try not to file minor claims.Making just one insurance claim can cause your annual premium to increase up to nine percent. In many cases, making a claim is necessary. However, there are times when you could cover the cost without making a claim. Weigh your options carefully and know that if and when you make a claim, you’re likely to see an increase in your premium.

8. Insure personal property for the replacement value, not actual cash value. Cash value sounds appealing, but it only pays for replacement up to the policy limits minus a deduction for depreciation. If you want to make sure your personal property is covered, know your policy limits and opt for replacement value. Then, you’ll be able to fully replace what you lost without having to worry about a deduction for depreciation.

Gunn-Mowery, LLC Can Get You the Coverage You Need

Whether you are buying homeowner’s insurance for the first time or have had the same policy for several years, there is a lot to consider. This has probably left you wondering, “How much homeowner’s insurance should I carry?” It may seem overwhelming to consider all of the different factors that go into answering this question, but we can show you the upside of homeowner’s insurance.

As an agency, we have the expertise to recommend coverage based on your needs. But we also work with multiple insurance companies to ensure competitive and affordable insurance rates. Our customers in York, Harrisburg, State College, Camp Hill and other PA communities know if they review their policy and don’t understand the jargon, they can call us and talk to a live person who can help them decipher it. We’d like to have the opportunity to help those who aren’t yet customers, too. Get started by filling out our online form to request a free, no-obligation quote.